Spewing Truth in the face of Lies

RI Tax Stupidity July 25, 2009

Yes I’m calling on you Representative Costantino, I emailed you about the Amazon tax issue and got no reply at all. So I’ll do this publicly.

The Providence Journal recently had a piece that says a D.C. based group called Budget and Policy Priorities supports the so called “Amazon Tax” implemented by New York and Rhode Island.

This is just another example of the utter ignorance of our state legislators. Maybe if you didn’t give away the candy store in the form of tax breaks to corporations that hardly need them, you wouldn’t be in the bind you’re in now. Seriously, did Bank of America really need a tax break, or Fidelity? No they didn’t.

But the “Amazon Tax” astounds me. In this case RI basically told the big online (and small) retailers that they’d have to collect RI Sales tax on all sales.

And predictably what did Amazon et al do? They discontinued their relationship with all RI based sellers, e.g. people who lived in RI and sold their goods via Amazon et al.

The net effect of this is as I predicted to reduce net taxes in RI. There have been a few comments on the articles on the Providence Journal that make that exact point. If you’re a seller and can no longer sell on Amazon, you don’t generate any revenue for the state to collect taxes on.

Did our brilliant legislators even stop to consider that fact?

Here is my proposal:

It’s simple. Go into MA and copy their sales tax statutes and then paste them into RI general law over our sales tax statutes. Because the state loses more sales tax revenue to people taking a 10 or 15 minute drive into Massachusetts and buying big ticket items then coming back to RI. Lets say you buy a $1,,200 computer in RI, the total would come to $1,284 (7% sales tax) whereas in MA the total would come to $1,260, (5% sales tax), or a $24 difference.

But by tying RI’s sales tax rate to that in MA, you make it disincentive to travel to MA to make purchases.

Lets try an experiment:

Let the total retail sales dollars in ri (R) = $1,000,000,000
Let’s say that of those sales dollars, approximately 40% is non taxable leaving us with $600,000,000. Let us also assume that approximately 30% of sales flees to MA. That leaves $420,000,000 in sales with taxes at 7% being $29,400,000.

Now lets do the same thing and apply a 5% tax to the entire billion. Now you have parity with MA and you’ve broadened the tax base so that everything (Books, clothing, otc etc.) is taxed.

The state of RI would get $50,000,000, or $20,600,000 more in tax revenue.